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In October of 2011 Thailand’s new government of Prime Minister Yingluck Shinawatra instituted a Paddy Pledging Program for white rice with prices 50 percent above market prices and fragrant rice prices 30 percent above the market. This was an attempt to short the world market for rice and drive incomes higher in rural areas that have lagged behind income growth in urban areas. Incomes have increased, but government stocks have increased sharply. Thailand lost its position as the world’s largest exporter of rice and likely faces WTO challenges.

Agriculture accounts for 41 percent of the nation’s labor force, but only 13 percent of GDP. Like many developing countries, agriculture remains a residual employer as productivity continues to increase in urban industrial and service jobs. For the 2011/12 rice crop, about 1.3 million rice farmers, 34 percent of total rice farmers, participated in the program. According to the U.S. Agricultural Attaché in Thailand, the program increased domestic prices by about 30 percent from a year earlier for white rice, and 10 percent for fragrant rice.

The previous government had a Price Insurance Program that protected incomes, but allowed Thai rice to compete in export markets. The current program provides a low interest loan to farmers based on the quantity of rice harvested and the loan rate. The loans can be repaid at the loan rate plus interest or, with the harvested rice. According to export estimates by the Foreign Agricultural Service of USDA, in the last three years Thailand had about 29 percent of global exports of rice. That share fell to 18 percent for the 2011/12 marketing year and is expected to recover to 22 percent for 2012/13.

The program could have had a chance of working if one or more producers had smaller crops in 2011/12, but just the opposite happened with the world crop up 15.8 MMT, 3.5 percent, to 465.3 MMT. Only 7.7 percent of rice production, 35.9 MMT, is expected to be internationally traded in 2011/12, but among major exporters India’s production was up 8.3 MMT and Pakistan 1.5 MMT. Bangladesh’s imports were down 1.0 MMT because of a large crop. FAS projections for 2012/13 have global production down only marginally at 464.2 MMT, but India’s production down 6.3 MMT. Thailand’s production is expected to be up 0.6 MMT to 21.1 MMT.

India chose to sell off some of its stocks and is the largest exporter for 2011/12 at 8.0 million metric tons (MMT). It exported 4.6 MMT in 2010/11 and 2.2 MMT in 2009/10. Vietnam continued to hold the number two position at 7.0 MMT, and Pakistan was fourth largest at 3.8 MMT. For 2012/13 FAS projects Thailand to return as the number one exporter at 8.0 MMT, down 25 percent from its 2010/11 peak of 10.6 MMT and closer to the previous two years of 9.0 MMT and 8.6 MMT. Vietnam is expected to export another 7.0 MMT, India 6.5 MMT and Pakistan 4.0 MMT.

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